Ajit Andhare was with Hindustan Unilever for almost a decade before joining Viacom18 Motion Pictures as chief operating officer in April last year. Starting this week he has four big releases lined up across the country. The first is the Tamil and Telugu versions of its 2012 hit, Kahanii. In March comes the Kangana Ranaut-starrer Queen. And, in April comes Manjunath, a biopic on the IIM graduate who was shot dead by the fuel mafia in Uttar Pradesh. Vanita Kohli-Khandekar spoke to him at length on his view of the film business. Edited excerpts:
It has been over a decade since the Indian film business corporatised but monetisation and scale remain an issue. (About 1,000-plus Indian films made Rs 11,240 crore or just about $2 billion in revenue in 2012. In the same year, 677 Hollywood films made about $40 billion.)
First, the Indian film Industry is under-indexed on value due to low per capita ticket realisation compared to the West. Hollywood addresses a $36-billion market, while we address $2-billion one. We have a high moviegoer population as compared to the US, the largest market, but ATV (average ticket value) is low at $2 compared to $7-8 in developed markets. That will evolve over the medium to long term with the increasing reach of multiplexes and macroeconomic growth. However, the issue within is lack of scale benefit on the supply side.
Having said that, I also believe scale is a misunderstood term. Why should there be scale? It is a term we use when there are economies of scale flowing to you, when higher volumes bring costs down. But are costs going down at any multinational studio? When we do slate, we are doing 12 or 15 projects separately, with separate companies on the supply side. (For instance, Viacom18 does a co-production with X or Y production houses.) Each of them have their own team, camera set-up, writers. Therefore, the costs add up. Television broadcast on the other hand today is five years ahead of film. They have addressed these challenges that film studios are facing. If a producer takes a project to a TV channel today, it's not his camera or lighting equipment. The back end is done directly by the broadcaster and there are economies of scale in TV production. In film, separate projects with separate production houses for each film mean there are no or little supply-side economies. The only aspects where economies come into play are marketing and distribution. The producer supplying films to studios avoid the risk completely and make a profit by selling rights; the risk is borne completely by the studio.
And, unless and until both the studio and the producer are partners in the risk and in the upside, the equation will remain lopsided. If a TV channel signs a production house for a show, they retain full intellectual property (IP) and pay 10 per cent or less as fees to the production house. In films, the studio underwrites all the risk and the supplier-producer gets IP and 50 per cent of the upside without a penny at risk.
But isn't that happening in Hollywood? As talent costs rise, most actors and directors form their own production houses and sell the rights of their work to the studios and take a huge share of the upside.
In Hollywood, the percentages are lower and base market numbers are much bigger. So, the upside is bigger. The talent usually doesn't take more than a fourth of the deal. Here, the producer gets say Rs 30 crore in costs and half of the upside. We are in an India-centric market, so the market of $2 billion all told is not the same as the one for Hollywood at $36 billion that operates on a global scale. And, so much fixed fee carries enormous risks. They (producers) are looking to make money from the studio before the studio does the P&A (print and advertising).
Till corporatisation was settling in, studios were paying because they perhaps treated it as the entry costs into the market. But today, we need to look harder for returns.
To have a better handle over the value chain, what studios need to do next is have control on costs. On the demand side, organised multiplex chains are consolidating and on the supply side, we are still challenged. We need a studio forum like, say, an Indian Broadcasting Foundation that will tackle some of these structural issues.
Why aren't studios in a position to tackle rising costs?
All studios are facing the same lopsided equation. The entertainment press just doesn't talk of this. The whole discussion is hijacked by box-office revenues, never on profitability of a film or a slate. Multinational balance sheets are financing films but we need to look for the shareholder returns if we truly mean corporatisation. The biggest challenge is profitability. We ran an analysis on 187 films over five years among top studios and found half of these were not even in-market successes. When the risk is so high, the risk capital needs to be charging higher.
The key issue on costs is talent (actors, writers, technicians) and that is at the heart of the creative process, so how do you reduce that?
Well, there are producers who have done better - Balaji, Yashraj and Vishesh Films, in particular. These do better because they discover and create talent, such as Anushka Sharma or Emraan Hashmi. That is something we need to do more - build talent (acting and directorial) and scripts. Balaji, Yashraj and Vishesh are all in better control of costs because they invest in talent and, therefore, are more profitable.
Secondly, there is an opportunity to segment the market. Thanks to multiplexes, script-led cinema is already at Rs 800 crore (of net box-office collection). So, that is critical mass. Studios should back more films that are script-led and not purely high-cost-high-risk talent-led projects. For example, Bhaag Milkha Bhaag (a Viacom18 film) was the first Rs 100-crore grosser that did not have an A-list star heading it. Of course, other films have also followed and demonstrated that it can be done. We do only a couple of star-led projects, the rest of our slate (15 films in 2013-14) is heavily content-led.
Thirdly, studios need to develop some organic capabilities like Yashraj Films - it has writers and talent on staff. We need to shift to a zone where there is an answer to the profitability question.
It has been over a decade since the Indian film business corporatised but monetisation and scale remain an issue. (About 1,000-plus Indian films made Rs 11,240 crore or just about $2 billion in revenue in 2012. In the same year, 677 Hollywood films made about $40 billion.)
First, the Indian film Industry is under-indexed on value due to low per capita ticket realisation compared to the West. Hollywood addresses a $36-billion market, while we address $2-billion one. We have a high moviegoer population as compared to the US, the largest market, but ATV (average ticket value) is low at $2 compared to $7-8 in developed markets. That will evolve over the medium to long term with the increasing reach of multiplexes and macroeconomic growth. However, the issue within is lack of scale benefit on the supply side.
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And, unless and until both the studio and the producer are partners in the risk and in the upside, the equation will remain lopsided. If a TV channel signs a production house for a show, they retain full intellectual property (IP) and pay 10 per cent or less as fees to the production house. In films, the studio underwrites all the risk and the supplier-producer gets IP and 50 per cent of the upside without a penny at risk.
But isn't that happening in Hollywood? As talent costs rise, most actors and directors form their own production houses and sell the rights of their work to the studios and take a huge share of the upside.
In Hollywood, the percentages are lower and base market numbers are much bigger. So, the upside is bigger. The talent usually doesn't take more than a fourth of the deal. Here, the producer gets say Rs 30 crore in costs and half of the upside. We are in an India-centric market, so the market of $2 billion all told is not the same as the one for Hollywood at $36 billion that operates on a global scale. And, so much fixed fee carries enormous risks. They (producers) are looking to make money from the studio before the studio does the P&A (print and advertising).
Till corporatisation was settling in, studios were paying because they perhaps treated it as the entry costs into the market. But today, we need to look harder for returns.
To have a better handle over the value chain, what studios need to do next is have control on costs. On the demand side, organised multiplex chains are consolidating and on the supply side, we are still challenged. We need a studio forum like, say, an Indian Broadcasting Foundation that will tackle some of these structural issues.
Why aren't studios in a position to tackle rising costs?
All studios are facing the same lopsided equation. The entertainment press just doesn't talk of this. The whole discussion is hijacked by box-office revenues, never on profitability of a film or a slate. Multinational balance sheets are financing films but we need to look for the shareholder returns if we truly mean corporatisation. The biggest challenge is profitability. We ran an analysis on 187 films over five years among top studios and found half of these were not even in-market successes. When the risk is so high, the risk capital needs to be charging higher.
The key issue on costs is talent (actors, writers, technicians) and that is at the heart of the creative process, so how do you reduce that?
Well, there are producers who have done better - Balaji, Yashraj and Vishesh Films, in particular. These do better because they discover and create talent, such as Anushka Sharma or Emraan Hashmi. That is something we need to do more - build talent (acting and directorial) and scripts. Balaji, Yashraj and Vishesh are all in better control of costs because they invest in talent and, therefore, are more profitable.
Secondly, there is an opportunity to segment the market. Thanks to multiplexes, script-led cinema is already at Rs 800 crore (of net box-office collection). So, that is critical mass. Studios should back more films that are script-led and not purely high-cost-high-risk talent-led projects. For example, Bhaag Milkha Bhaag (a Viacom18 film) was the first Rs 100-crore grosser that did not have an A-list star heading it. Of course, other films have also followed and demonstrated that it can be done. We do only a couple of star-led projects, the rest of our slate (15 films in 2013-14) is heavily content-led.
Thirdly, studios need to develop some organic capabilities like Yashraj Films - it has writers and talent on staff. We need to shift to a zone where there is an answer to the profitability question.